Shortage set to keep copper on the boil

A predicted copper shortage is helping keep the base metal near a record high and locally listed explorers and producers are benefiting.

Markets are always a tug-of-war between bulls and bears, but in the case of copper it appears the bears have gone into hibernation.

Citigroup, Credit Suisse and Goldman Sachs are just a handful of the brokers predicting that copper will maintain its near-record price throughout the year and into 2012.

Copper is currently trading at $US9550 a tonne, just shy of its record high $US9960 touched earlier this week.

A lack of new mining sites continues to make the supply of copper tight and with very few projects coming on line over the next two years, it is unlikely the dynamics of the market will change, that means higher copper prices for longer.

Copper remains the “strongest" of the major base metals in terms of its supply and demand fundamentals Goldman Sachs analyst Malcolm Southwood said.

“The main question in our minds is the extent to which the impending shortage is already priced in," he said.

Mr Southwood believes it is clear that copper is being priced pre-emptively for shortage, and suggests investors should be long copper equities moving through 2011.

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Company Profile

Equinox
, one of the best performing stocks of 2010, advancing 37 per cent, has continued its climb into the new year with shares in the company up more than 3 per cent this week.

Last year Equinox announced plans to acquire Citadel Resources, which has the rights to develop the Jabal Sayid project in Saudi Arabia, which has the potential to become a world scale copper mine.

Earlier this week Equinox announced it had secured 89.8 per cent of Citadel’s shares and was on track to complete its acquisition of the company.

At the smaller end of the market, copper explorer
Finders Resources
has a had a solid couple of sessions, putting on more than 10 per cent in the new year.

Finders Resources, which has a market capitalisation $118 million, has projects in Indonesia and Sumatra.

Meanwhile,
Bougainville Copper
has started the new year with a bang, surging more than 20 per cent on speculation the company could be about to reach a deal under which it would reopen its Panguna mine.

The mine has been shut since 1989 due to civil unrest in Bougainville.

Shares in
Moly Mines
have put on nearly 15 per cent in the first three sessions of trade this year, thanks in part to the bullish sentiment surrounding copper.

Moly Mines also produces iron ore and late last month it sent its first shipment of the bulk metal to China.